Consider three investment alternativ

es: a perpetuity, an ordinary annuity, and an

annuity due. All three have the same

payment amount. The annuity due and the

ordinary annuity have the same number of

payments and the number of payments is

greater than one. The interest rate is posit

ive and the same for all three investments.

Given this information which of t

he following statements is correct?

a.

The present value of the perpetuity is

less than the present value of the ordinary

annuity.

b.

The perpetuity and the ordinary annui

ty have the same present value.

c.

The ordinary annuity and the annuity

due have the same present value.

d.

The present value of the ordinary an

nuity is less than the present value of

the perpetuity

.

e.

The present value of the annuity due

is less than the present value of the

ordinary annuity.

Explain to me why each answer is wrong or correct